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Scott Underwood, former IDEO jack-of-all-trades, has a wonderful history of the IDEO's ubiquitous logo in his portfolio of projects from his IDEO days. Read the full story here.
Steve Jobs (who made news today) recommended the graphic designer who designed the first logo, Paul Rand. At the time, in 1991, IDEO couldn't afford Rand's rate for a complete corporate identity, and so Rand only designed the logo. Bill Moggridge had come up with "IDEO" after finding the root "ideo-" in the dictionary. However, people often asked what I-D-E-O stood for. Early acronyms, like "an innovation design and engineering organization," came only after the fact and never caught on.
In 1997, the logo was altered slightly by Pentagram's Michael Beirut. The I, D, E, and O were thickened and reshaped to fill the blocks more evenly. There was even a Google-esque primary-color version, two years prior to the introduction of Google's now-iconic logo.
Each of the various departments within IDEO were allowed to choose their own color scheme for business cards, while each employee could choose one of the logo variations. This great idea granted a bit of individuality within a uniform corporate design.
Other logos—many short-lived—were also designed over the years for various IDEO ventures.
Dave Seliger is a Postgrad Fellow in Logistics and Ext Affairs at the NYC Office of Emergency Management. He has extensive experience helping firefighters, police officers, and disaster responders improve their services through design.
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The History of the IDEO Logo
You've got the sequence backwards of who recommended Rand. If you read Scott's intranet page, you'll see that Kelley recommended Rand to Jobs for the NeXT logo, and then used Rand for the IDEO logo.
I remember a joking fax (pre-email days) sent over from Moggridge Associates in London to ID Two, pretending to be from the desk of Paul Rand with early logo sketches, looking for feedback. They looked just like the IBM and AT&T logos (which Rand did), except with IDEO instead!
I think I remember Scott Underwood, who was in the middle of doing some ID Magazine competition entries when I was there. Good times. The ID Two studio was less than 25 people (large for an industrial design studio back then). Tim Brown was on a year swap from Mogg Assoc, and obviously stayed :) He was also my teacher for a semester at CCAC (along with Tony Guido and Paul Montgomery, who were involved in the early Apple work at frog design, where I now work). Naoto Fukasawa had just arrived from Tokyo in SF, and was clearly a huge talent.